Jesse & Kathy Clifton, REALTORS® 907.699.6024

Changes in the market are occurring almost daily. Fairbanks is continuing to feel the pressure of a nationwide housing slowdown. Market activity decreased for the 7th month in a row; we’re down 32.1% in December ’07 as compared to December ’06 and 23.9% from November ‘07. It’s also taking longer to find buyers for the homes currently on the market. Marketing time increased 76% in December from December ’06 to 102 days on the market and 56.9% since November ’07.

Interest rates are climbing somewhat as a result of a global credit crisis. With banks incurring heavy loses from delinquent mortgages, bank to bank lending has dramatically slowed. This has resulted in the Federal Reserve auctioning off $40 billion in loans to improve the flow of funds between banks and promising to auction off another $40+ billion in January. Unfortunately there are other factors at work making investors skittish which may not be cleared up in the immediate future.

My crystal ball is still on the fritz, but I can say with fair confidence that the market will continue to limp along through the spring. The absorption rate, or the time it will take to sell all the listings currently on the market is hovering at 7.4 months, up 54% in the past 7 weeks. Fairbanks real estate buyers have a lot of homes to choose from and sellers are beginning to offer incentives to lure them away from the competition. Not all segments of the local market are declining, so buyers shouldn’t expect every seller to give away the farm. Sellers need to make sure their home is priced competitively and in good condition. Have specific questions? Call or email us anytime. We love hearing from you!

Earlier this year I predicted the absorption rate for the Fairbanks real estate market would hit the 6-month threshold around the first of the new year. We haven't even celebrated the new year yet and I've alreday been proven wrong. I suppose it had to happen sooner or later.

With home sales slowing a little more than expected, we've seen the absorption rate climb at a pretty steady clip. As of today there are 494 homes listed for sale in Fairbanks & North Pole; only 66 sold in the past 30 days, which gives us a 7.4 month average absorption rate. I've broken down the rates for both Fairbanks and North Pole below. Nearly every segment is in a 'buyers market' (6+ months of inventory) with the exception of the 0-150K market in North Pole.

Fairbanks Absorption Rates:
0-150K: 6.75 Months
150-250K: 9.14 Months
250K-350K: 5.25 Months
350K+: 18.5 Months

North Pole Absorption Rates:
0-150K: 2.85 Months
150-250K: 3.7 Months
250K+: 13.75 Months

If your home is currently listed, it's time to take a serious look at your asking price. Buyers are evidently doing so.

Remember them? When all you had to do to sell your home was to put a sign in the front yard and within a matter of days multiple buyers were standing on your front porch vying for the chance to outbid each other? Well, that was yesterday. Welcome to today. I sat down this afternoon to look through the MLS for a client with relatively specific needs. As I clicked past listing after listing, I couldn't help but wonder what these folks are thinking.

The YTD average marketing time for Fairbanks Alaska real estate is less than 60 days. Only 7.7% of the homes currently for sale are under the yearly DOM average for Fairbanks. In any market, but especially a slowing market, days on the market must be considered when pricing a property. That sounds like an obvious statement I realize, but with 92% of our market exceeding the average marketing time it would seem it needs to be said.

As inventory builds, correct pricing becomes critical if you want to sell your home or if you're content to just have it listed. Looking at the homes that have been on the market from 3 to 8 times the average days on the market (150-400+) , 27 are new construction 'spec' projects with an average DOM of more than 7 months.

Having built more than a few spec homes I can tell you that time is not your friend. Builders: If you want to move these projects, it's time to get serious about, and come in line with current market value. The interest payments alone always made me very conscious of market time; extending it unnecessarily never really penciled out when I factored in carrying costs. The existing homes in this '3-8 x average DOM category' have an average equity value of more than $97,000, according to the North Star Borough. Granted, some are going to have to write a check at closing, but others, it appears, are simply holding out for a return to 2005 pricing. If you're home is languishing on the market, it's time for a fresh evaluation of your position in the market. Have your agent prepare a new comparative market analysis showing recent sales (no more than 3 months old). If you're an unrepresented seller, maybe it's time to consult with an agent or an appraiser to determine current fair market value.

The best and fastest way to find a buyer and preserve as much of your equity as possible is to make your home competitive with the market.

Years ago we had the opportunity to invest in a global energy fund. At the time we were relatively new to managing our own investments. As a result we tracked the funds movement on what seemed like an hourly basis. At the end of the first year saw a return of almost 61%. Feeling confident we let it ride even after it leveled off. One morning I checked the value and found we had lost 8%... then 11%. By the time I sold our shares we 'lost' 14%. Or did we?

Looking at the value of our shares when we bought vs when we sold, actually showed our rate of return was almost 57%. Not bad for having withstood the volatility for a little more than a year. The same is true where real estate is concerned. A report on the top 10 worst housing markets in the US would seem to paint a dismal picture of the housing market... or does it?

Leading the top 10 list of worst housing markets for the 3rd Quarter 2007 is Merced, California which reported a 13% drop in home prices. The real news however, is median prices are up more than 72% over the past 5 years. 72.54% to be exact. The average change in value for all the "worst housing markets" is actually 69.8%.

Locally, we're still posting positive returns as well. YTD, real estate prices in Fairbanks Alaska are up 37.4% since 2002. The moral of the story; get the facts before you believe everything Chicken Little is screaming about where the state of the housing market is concerned. Real estate remains a solid long term investment.

While it's true that the US housing market is not as healthy as it was even a year ago, it's important to remember that real estate is local. Overall, Fairbanks Alaska real estate prices, for example, are up 5.1% from 2006. Prices for existing homes are up 6% from 2006. Not every segment of the real estate market is in a decline.

Although price is important, it's but one of a multitude of factors that go into most buyers decision making process. Age, condition, location, school district, proximity to work, schools, etc. all come together to make a particular property a 'good deal' or not.

When you find the house that feels like home and fits your lifestyle, sit down with your agent and determine fair market value for the property. Negotiation is the name of the game when preparing an offer, but keep in mind that not every seller is desperate to sell. Sometimes a 'good deal' means getting the house that fits the needs of your family for fair market value, which may very well be what the seller has the home priced at.

Don't negotiate yourself out of the perfect house in pursuit of a unattainable goal based on hype. Arm yourself with facts about the market and you'll recognize a 'good deal' when you see one.

Despite being at the heart of the holiday season, the market continues to march forward. The total number of homes sold rose a bit this week, and along with it, the total sales volume. Two $400K+ homes on the Ridge closed this week, although to get to closing they each took a 20% hit on their initial asking price. Combined marketing time was just shy of two and a half years. My guess is if they had been quicker to respond, they could have mitigated their loss somewhat.

Although we saw a slight reduction in the inventory of available homes this week, we saw a significant jump in the absorption rate. This week we're sitting at 6.8 months; that's a sharp increase from 6 weeks ago when we were looking at 4.8 months. A general rule of thumb is that a 6 month absorption rate is considered a healthy, balanced market. Compared to last year when we struggled to get above 2.5 months, sellers are having trouble seeing this market as balanced.

The other headline item this week is the continuing financial liquidity issue. The Federal Reserve is pumping cash into the system $20 billion at a time to encourage bank to bank lending. So far it isn't having much of an effect. Investor confidence, or the lack thereof, in mortgage backed securities and the volatility of the bond market is combining to drive interest rates slightly higher. While still very attractive, rates are up this week. The 30 year fixed is back to 6.125, while FHA/VA rates are back to 6.000 as of this morning.

Kathy and I want to wish everyone a very Merry Christmas. God Bless!

The Sarasota Herald Tribune has created a searchable database of teachers names who have been sanctioned for various offenses.

The database, which contains almost 40,000 names is maintained by the National Association of State Directors of Teacher Education and Certification. No mention is made as to why individual teachers were sanctioned. Inclusion on the list could have resulted from financial or sexual misconduct, criminal convictions or other actions as deemed appropriate by the respective governing authority.

In a study of disciplinary actions taken against teachers from 2001 - 2005, more than 25% involved sexual misconduct. As you can imagine, there are already rumblings that the list is unlawful. We have many clients that are employed as teachers and administrative staff in the Fairbanks North Star Borough School District. I'm proud to say that they are very much an asset to our district. Information is power and I'm posting this for that reason only. Use the information as you will.

Click the image below to search the database using a name and/or state.

According to the release, the FED received almost $58 billion in bids for the $20 billion being offered. To date more than 166 commercial banks have vied for the reduced rate funds.

The second of four auctions scheduled has drawn so much interest the Fed announced they will continue pumping money into the system bi-weekly "for as long as necessary to address elevated pressure in short term funding markets." Additional short term loan funds will auctioned of January 14th & 28th.

Translation: Banks are hurting. Mortgage loses have cost already cost banks billions of dollars in operating capital. Most lending between financial institutions occurs through bank to bank lending. Commercial banks generally don't go to the Fed for fear investors will smell blood in the water. With the Fed expected to make more than $90 million available in emergency loans; there IS blood in the water.

To put the credit crunch in perspective, the Savings and Loan crisis of the 80's only cost $150 billion. Current estimates put the total financial loss due to the mortgage meltdown at just over $1 trillion. If the low rates don't have the intended effect and the economy slides into a recession, $1 trillion will be but a drop in the bucket.

Talk about being asleep at the switch.

I've been handwriting letters to my mother for years, once a week like clockwork. Who doesn't love getting mail? As long as it's not a bill, I would think most of us.

I came across the next greatest thing on Amazon.com this afternoon. How many of us have parents or grandparents that don't use a computer? My mother has one but she swears it's possessed by the devil.

For a paltry $149 you can buy the HP Printing Mailbox; essentially a remote printer. You set up an account with "Presto", send an email from your regular email account and it prints wherever the printer is plugged in. How cool is that?

It does require a monthly service and you do have to keep it filled with paper and, when necessary, ink. That should be easy enough for anyone to handle.

Of course, the old faithful pen and paper method still works perfectly, but for some reason this just hit my "must buy" button.

Insurers use CLUE reports to determine how likely you are to file a claim against your homeowners or auto insurance policy. CLUE reports are generally reviewed prior to issuing a new insurance policy and before renewing an existing policy.

The CLUE database is maintained by ChoiceTrust, an information clearinghouse that has been providing "decision-making technology" since 1977 to insurance companies, as well as local, state and federal government agencies.

What does this mean to you? Each time you file a claim, or report a potential claim to your insurance company, that information is recorded in the CLUE database, even in no money was ever paid by your insurance company. Too many claims can result in a policy being cancelled.

For real property, claims and damage reports are tied to the property, not the owner. Any claim or damage reports remain on the CLUE report for 5-7 years. This means any claims filed by a previous owner may negatively affect your ability to obtain insurance as well as what you pay for the policy.

If you're buying a home, make sure to ask the seller if they have filed any claims against the property during their tenure. If so, make sure to shop insurance rates during your discovery period. Finding out at the 11th hour, just before settlement, that your insurance policy has an astronomical premium due to claims filed could have serious consequences.

Curious as to what your CLUE report says? Download instructions and a CLUE report order form (.pdf). ChoiceTrust can also be reached at 866-312-8076.

Notice of Default filings are down a little this week, although overall we're still seeing far too many. 168 Default Notices have been filed so far this year. We're also seeing a growing number of Deed of Trust Modifications being recorded. If you are experiencing trouble making your mortgage, please contact your lender and open a dialogue with them.

Locally, interest rates took a slight hike this week with the 30 year fixed closing out at 6.125%; rates for both Alaska Housing's Taxable and Tax Exempt program rose this week to 6.250 and 5.875%, respectively.

In the past several years the sale of new construction homes has skyrocketed. Seeing a demand for quality housing, contractors began building in earnest in mid to late 2000. As the market began what some thought was an endless real estate bull market, more and more builders began ‘getting in on the action.’ For a while it seemed as though everyone that could swing a hammer was suddenly being reinvented as a homebuilder. Men and women who had been or were plumbers, teachers, pilots or office workers caught real estate fever and jumped on the building bandwagon. While the capitalist in me says that’s a good thing, the Realtor in me is singing a somewhat different story.

A few questions to ask your Realtor when looking at new construction properties:

• How long has the builder been building homes? It’s important to know whether the person you’re thinking of buying a house from will be around next month or next year when something goes wrong or you have questions about your new home.

• Is he/she licensed by the State of Alaska as a General Contractor?

• Does he/she have a Residential Endorsement? Licensed building contractors are required to carry one. Without one, financing a home built after 1992 can be an issue if you (and future buyers) want to take advantage of lower interest rates offered by Alaska Housing Finance Corporation.

• How many homes does he/she build a year, on average? As with most professions, experience is a good thing. This could also alert you to a scheduling issue if he/she has a dozen properties all vying for time and resources.

• Does the builder provide a written warranty? A warranty is only as good as the person standing behind it. With that said a written warranty will outline exactly what the builder is responsible for and what you, as the new homeowner, are responsible for.

• Will the builder provide references? If so, contact them. What do they have to say about the builder and his product? Would they buy another home from him/her again?

• Can you see other properties the builder has completed? Tour properties under construction as well as finished homes to get a feel for the level of quality and attention to detail. A lot can be hidden by drywall.

• Will the builder provide the PUR 101 (Energy Rating Certificate) and PUR 102 (Building Inspections)? There are no building codes in force for the majority of the Fairbanks North Star Borough so it’s important that the property was inspected during construction. PUR 101’s are now always supplied by the builder; you’ll need one to finance your property through Alaska Housing.

• Who was/is the building inspector/energy rater? There are good and bad apples in every bunch.

• Does/will the house have a passive or active air exchange system? A Heat Recovery Ventilator (HRV) is much more efficient in capturing heat expelled during air exchanges whereas a passive system doesn’t recapture any.

• If a spec home (built to sell without a specific buyer in mind), what are the options/upgrades?

• How long will it take to complete construction and what are the penalties for failing to meet that deadline? Reputable builders do their very best to meet contract deadlines but there are times when events out of their control happen, such as delays in materials or trade issues.

• What type of foundation is under the home? Stacked concrete block on top of a poured concrete footer is fairly standard in Fairbanks. Insulfoam-type foundations are becoming more popular but ‘all weather wood’ and post-on-pad foundations are still widely used.

• Did the builder have the lot drilled for permafrost or ice lenses?

• Is the property serviced by a well or a water holding tank? Wells are expensive to install, especially in the hills where the cost can easily hit $30,000.

• Is the builder going to do any landscaping? Builders in Fairbanks generally grade the area around the property but will provide landscaping services for an additional charge.

• Does the property have rain gutters? If so, are they seamless?

• What is the wall thickness? 2x6 is standard in our area but some builders prefer 2x8 or even double wall construction. Thicker walls mean more insulation which reduces your utilities cost.

• How many heat zones are in the house? What rooms do they control?

• Is the builder offering any incentives and if so, what are they? Remember, there is no such thing as a free lunch. What are you giving up to gain that incentive?

• What appliances and mechanical equipment is included? Refrigerators are often considered personal property. Some builders opt for a simple range vent hood rather than a microwave/vent hood combination.

We are fortunate to have more than a few home builders with excellent reputations in Fairbanks that not only build quality homes but stand behind their product after the sale.

If you’re shopping for a new construction property it’s important to know what to look for and what to avoid. A small amount of diligence up front will pay immense rewards in the long run. With the average cost of a new construction home hovering just above $240,000 it’s important to do your homework to protect your investment and to know exactly what you’ll receive at close of escrow.

In Fairbanks nearly 94% of all buyers financed their home purchase, a figure slightly higher than the national average. Although the sub-prime market meltdown has made certain non-conventional home loans all but impossible to get, virtually anyone with a decent credit score and sufficient income can still obtain a mortgage.

Pre-Qualified vs. Pre-Approved

Loan pre-qualification is a simple process. It can be done over the phone, in person or via an online form on a lenders website. It takes into account basic information about your income and assets and provides an amount for which you may qualify. The keyword here is may. The amount you are pre-qualified for is based on unverified information you provide without a thorough examination of your financial background.

A pre-approval on the other hand, is a much more involved process. In order to be pre-approved a lender will ask for and review detailed information regarding your employment, income, assets, debts and credit history. Most major lenders utilize an automated underwriting system which can give you preliminary loan approval almost instantly. This pre-approval will tell you the exact amount you qualify for.

After receiving your pre-approval it's important to take a little time and review your budget. Just because the bank will loan you $300,000 doesn't mean you are necessarily comfortable with making that monthly payment. Look at your current spending habits too see if your projected mortgage payment will put you out of your comfort level. The last thing anyone wants is to be burdened by a mortgage payment. Make sure to include the cost of utilities in your planning; electricity, water/sewer fees, trash collection and natural gas/heating oil, all of which can total 20-30%% of your total monthly mortgage payment.

Next: Selecting an Agent

Overall market inventory is still relatively high. Current housing inventory, including Delta Junction is 540, which strangely enough was our market inventory last week. The absorption rate (time it takes all active listings to sell) rose this week from 5.25 months to 5.4 months. I expect this number to decrease a little as we slide into December. There are rumblings that we'll topple the 6 month number by the end of December.

As with everything in life there is good news as well in real estate this week. At 5.875% the 30 year fixed is as its lowest point this month. This is a great time for everyone with an ARM to add a little stability to their mortgage future.

On a related note the number of Notice of Default (foreclosure) filings in Fairbanks is on the decline. We're also seeing a number of Deed of Trust modifications being recorded. If you're having trouble meeting your mortgage obligations, please... please do not wait. Contact your lender and let them know. Mt. McKinley Bank, Spirit of Alaska Federal Credit Union (formerly Northern Schools FCU), MAC Federal Credit Union, Denali State Bank and Alaska USA Federal Credit Union have recorded numerous DoT modification agreements in the past couple of months.

Overall market inventory is still relatively high. Current housing inventory, including Delta Junction is 540, which strangely enough was our market inventory last week. The absorption rate (time it takes all active listings to sell) rose this week from 5.25 months to 5.4 months. I expect this number to decrease a little as we slide into December. There are rumblings that we'll topple the 6 month number by the end of December.

As with everything in life there is good news as well in real estate this week. At 5.875% the 30 year fixed is as its lowest point this month. This is a great time for everyone with an ARM to add a little stability to their mortgage future.

On a related note the number of Notice of Default (foreclosure) filings in Fairbanks is on the decline. We're also seeing a number of Deed of Trust modifications being recorded. If you're having trouble meeting your mortgage obligations, please... please do not wait. Contact your lender and let them know. Mt. McKinley Bank, Spirit of Alaska Federal Credit Union (formerly Northern Schools FCU), MAC Federal Credit Union, Denali State Bank and Alaska USA Federal Credit Union have recorded numerous DoT modification agreements in the past couple of months.